CEO of global asset manager explains how 15 per cent tariffs impact the outlook for a European stock market on the rise
The announcement of a trade deal between the US and EU, with 15 per cent tariffs on roughly 70 per cent of European exports to the US, is not derailing Tyler Mordy from his bullish stance on Europe. The CEO & CIO of Forstrong Global Asset Management explained that despite the deal being greeted as a ‘win’ for the US and less ideal for Europe, the dynamics that drove European markets to be the top performing global equity segment in the first half of 2025 remain in place.
Mordy outlined why Europe is now moving away from its decade in the doldrums and why this deal doesn’t do enough to derail that narrative. He highlights some of the underlying trends and observations from a recent fact-finding mission to Scandinavia and Southern Europe in the context of big-ticket trends like the newfound German willingness to move away from austerity and take on more sovereign debt to stimulate their economy. He argues that Europe now has a range of opportunities before it that, if taken advantage of appropriately, could result in a secular bull market for the continent.
“It’s very similar to what we’re seeing in Canada—the rise in patriotism and more stimulative policy,” says Mordy. “We’ve had a highly aggressive Trump administration when it comes to trade and competing values. JD Vance’s speech at the Munich Security Conference struck a deeply personal chord for many Europeans. This dynamic illustrates what our investment team calls the ‘protectionist paradox’—the more aggressive Trump’s rhetoric and tariffs became, the more other countries pushed back by stimulating their own domestic economies. Germany’s recent €50 billion infrastructure package—equivalent to 11.4% of its GDP—is a clear example of this response and highlights deeper, long-standing issues within Europe.”
Europe, Mordy explains, has struggled with competitiveness for the past decade. Former European Central Bank President and Italian Prime Minister Mario Draghi articulated this in a 2024 report that argued “fragmentation, over-regulation, insufficient spending and undue conservatism” was holding Europe’s economies back. Much of this stems from the austerity policies adopted after the 2008 Global Financial Crisis—a period that now seems to be giving way to a broader recognition: unless Europe invests meaningfully in its domestic economies, it risks continued stagnation.
Mordy has identified a number of pieces of ‘low hanging fruit’ that EU policymakers can target to improve competitiveness. They can seek to emulate the US’ world-leading interplay between universities and the private sector. They can help foster greater capital scale and risk appetites to support European start-ups and tech businesses. They can use public capital to encourage private sector innovations.
There are already signs of an emerging cyclical uptrend. Mordy notes that loan growth and wage growth are both expanding. Corporate earnings are turning more positive and certain sectors that had long been value traps, like European banks, have broken out and begun performing well. That, in turn, reinforces greater risk appetites and can create a virtuous spending cycle. Compared to the US, which is arguably late in its cycle, Europe has recently put in a bottom. Additionally, European stocks trade at a roughly 35 per cent discount to their US peers, with similar profit growth expectations for the next year.
As positive as this story might appear to be, the question remains as to why a less than favourable deal with the US isn’t enough to derail it? Mordy notes, first and foremost, that a resting 15 per cent tariff is better than the 30 per cent rate initially imposed before this deal. Moreover, only about 20 per cent of EU exports go to the United States, meaning the blow is relatively soft for European economies just as stimulus and infrastructure spending appears to be targeting domestic demand. While the full implications of the deal will become clearer as more details emerge, Mordy emphasizes that, for now, there’s little reason to hit the panic button.
For Canadian advisors who have only recently begun increasing client exposure to Europe, the new trade deal presents a challenge. It introduces short-term volatility and negative headlines, potentially disrupting what is still a relatively new narrative for many Canadian investors. Mordy outlines how advisors can navigate these emerging concerns.
“Tariffs are the headline risk—they’re what everyone is focused on right now. But it’s important to look at the broader macro story unfolding,” says Mordy. “This presents an opportunity for advisors to talk to clients about encouraging signs like rising profit growth and a clear pivot toward more stimulative policies. One key point to remember is that markets move at the margin. The U.S., for example, has been running 7% deficits for some time—there’s been no real shift in fiscal stance even with the One Big Beautiful Bill. Europe, on the other hand, is undergoing a meaningful transition. After years of austerity, both policymakers and the private sector are pivoting toward investment. That shift is starting to show up in capital markets and has a long way to run.”
